Pennpic Hoping To Lower Insurance Costs

July 23, 1986|by KENNETH HARRIS, The Morning Call

The Pennsylvania Public Interest Coalition yesterday launched a statewide campaign aimed at curbing "the skyrocketing costs of insurance."

Dixie White, PennPIC's regional director, said, "We believe that the fundamental cause of the insurance crisis is the business practices of the insurance industry; it is not the result of a litigation explosion in our society." White spoke during a morning news conference in Allentown as six other chapters of the organization held similar news conferences.

"The insurance industry has launched a well-orchestrated multimillion dollar media campaign to convince Pennsylvania residents that insurance costs are skyrocketing because the American public is suing at a phenomenal rate and getting exorbitant damage awards," White said.

The coalition disputes the insurance industry claims, she said, reading from a prepared statement.

According to an April report released by the National Center for State Courts, the number of cases filed in state courts has increased at about the same rate as the nation's population between 1978 and 1984, White said.

In addition, a report by the Consumer Federation of America stated that the amount of jury awards has increased at the same rate as medical costs over the past 10 years, she added.

"Every expert review of the number and dollar amounts involved in liability suits shows that there have been no unjustified increases in recent years," White said. "The real problem is that the insurance industry's underwriting profits and losses are cyclical."

Despite insurance company claims that $25 billion was lost nationally in underwriting claims for 1985, the insurance industry actually made a net profit of $1.7 billion, taking into account realized investment income, capital gains and federal tax credits, she said. The underwriting loss only reflects the difference between premiums and insurance claims, she said.

According to a report by a House judiciary subcommittee, the insurance industry paid "only 29 cents to 57 cents in claims and allocated loss adjustment expenses, for example, defense costs, on every premium dollar taken in," White said.

The problem in the state's insurance industry lies in the "affordability and availability" of insurance, said D. Bernard Kirshner, executive director of the Insurance Committee for the state House of Representatives.

Since May of last year, the House committee, under the guidance of its chairman, Rep. William Rybak, has probed the problems of the insurance industry, Kirshner said. Furthermore, in the last week of August, the committee plans to release its findings, detailing the accounts of its three- phase approach, he added.

In the first phase, legislators held public meetings across the state and tried to get a grasp on the severity of the situation, Kirshner said. At the meetings, conducted last year, legislators heard "horror stories" of unprecedented rate increases, he added. In one instance, Kirshner said, there was an overnight rate increase of 1,000 percent.

"During phase two, we tried to pinpoint the problem," he said. This means that committee members met with various people connected with the insurance industry and attempted to find the reasons for the rate differences, according to Kirshner. And lastly, he said, committee members called legislators in other states to find out how they are dealing with similar problems.

Any recommendations to correct the problem will be published in the report, he said.

However, White said PennPIC has several recommendations for legislative reforms in the insurance industry. According to PennPIC, legislators can solve the insurance problem by:

- Strengthening the State Insurance Department's regulation of insurance companies.

- Requiring insurance companies to disclose more detailed information about their profits and losses so that it can be determined if their rates are fair.

- Limiting insurance companies' ability to make excessive profits by limiting rate increases to a certain amount after review by the Insurance Department.

- Creating an Office of Consumer Advocate to represent consumers in insurance rate increases in the same way a consumer advocate represents the public in utility rate cases.

- Creating joint underwriting associations that make affordable insurance available to individuals and groups that are good risks when the insurance industry will not.

"What Pennsylvanians really need is insurance against the insurance companies' greed," White said. "Our (PennPIC's) goals are more clearly in the public interest, and will gain the majoritarian support needed for real legislative reform of the insurance industry."